Covid 19 effect on economy

Master of Business Administration (MBA)
Faculty of Business Studies
Jahangirnagar University
Assignment
On
“ The Impact of Coronavirus on the Economy ”
Course Code: EMBA - 503
Course Title: Managerial Finance
Submitted To:
Dr. Md. Sawkat Hossain (MSH),
Associate Professor,
Department of Finance & Banking,
Jahangirnagar University (JU)
Submitted By:
Group Assignment
Section: C
Batch: 27
Jahangirnagar University (JU)
Date of Submission: 14-11-2020

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Group Members
Name ID
Tanzib Ahmed 20202124
Anik Mondal 20202147
Romaiya Sultana Rimi 20202145
Harich Mahmud 20202123
Sinthia Sharmin 20202132
Md. Yousuf Ali 20202148

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Table of Contents
Page No
1) Abstract …………………………………………………………………….. 04
2) Introduction………………………………………………………………. 04-05
3) Literature Analysis……………………………………………………… 05-18
The Impact of Coronavirus on the Global Economy
Economic Impacts of COVID-19
The Impact of COVID-19 on the Three Industries
The Impact of Coronavirus on the Bangladesh Economy
Current State of Bangladesh Economy in view of the Coronavirus Crisis
External Sector Performance Scenario
Economic Challenges
Crisis as Opportunity
4) Recommendation……………………………………………………….……. 19
5) Conclusion……………………………………………………………………. 19
6) References……………………………………………………………………. 20

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Abstract
COVID-19 also known as Coronavirus, the pandemic today is not only a health issue. Its
impacts cut across all levels of society causing important consequences for social, economic,
educational, political and human security. The COVID-19 pandemic has resulted in over 4.3
million confirmed cases and over 290,000 deaths globally. It has also sparked fears of an
impending economic crisis and recession. Social distancing, self-isolation and travel restrictions
have to lead to a reduced workforce across all economic sectors and caused many jobs to be lost.
Schools have closed down, and the need for commodities and manufactured products has
decreased. In contrast, the need for medical supplies has significantly increased. The food sector
is also facing increased demand due to the panic-buying and stockpiling of food products. In
response to this global outbreak, we summarize the socio-economic effects of COVID-19 on
individual aspects of the world economy.
“We do recognize that an [interest] rate cut won’t reduce the rate of infection….It won’t fix a
broken supply chain. We get that. We don’t think we have all the answers. But we do believe our
action will provide a meaningful boost [for] the economy.”
- Jerome Powell, Chairman, US Federal Reserve, at a press conference.
“….an enormous and extremely fragile network….that has been building for centuries but that in
the past two decades has grown through seamless connection to modern technology. Our way of
life has shifted – from individuals to markets, from localized to globalize. So far, this
interconnectivity has largely been strength, creating a network so big that each of its smaller
nodes can be imperfect or fail while the others persist. But much like a virus exploits a small
vulnerability, creating a chain of reactions that allow it to weaken its host, a true global pandemic
could work its way through the interconnected ecosystems that support our present way of life.”
Charlie Warzel, “The coronavirus will test our new way of life”, New York
Times, Global Edition, March 5, 2020, p. 12.
Keyword: Coronavirus, Pandemic, Global Economy, Bangladesh Economy
Introduction
As the COVID-19 virus spreads globally, economic paralysis and unemployment follow in its
wake. But the economic fallout of the pandemic in most emerging and developing economies is
likely to be far worse than anything we have seen in China, Europe, or the United States. This is
no time to expect them to meet their debt payments, either to private or official creditors. With
inadequate health-care systems, limited capacity to deliver fiscal or monetary stimulus, and
underdeveloped social-safety nets, the emerging and developing world is on the cusp not only of
a humanitarian crisis, but also of the most serious financial crisis since at least the 1930s. Capital
has been stampeding out of most of these economies over the past few weeks, and a wave of new
sovereign defaults appears inevitable. These are extraordinary times. As the outbreak spreads,
more and more lives are disrupted. Though it is challenging, we must recognize the urgency of
the moment we are in and do our best to adapt—both to the essential social distancing measures

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being put in place around the world, and to the personal tumult it is creating in all our lives. The
COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary
protection measures are severely impacting economic activity. As a result of the pandemic, the
global economy is projected to contract sharply by –3 present in 2020, much worse than during
the 2008–09 financial crisis. In a baseline scenario--which assumes that the pandemic fades in
the second half of 2020 and containment efforts can be gradually unwound—the global economy
is projected to grow by 5.8 present in 2021 as economic activity normalizes, helped by policy
support.
Literature Analysis
The Impact of Coronavirus on the Global Economy
Coronavirus disease 2019 (COVID-19) is an infectious disease caused by severe acute
respiratory syndrome coronavirus (SARS-CoV-2). It was first identified in December 2019 in
Wuhan, China, and has since spread globally, resulting in an ongoing pandemic. As of 16 May
2020, more than 4.59 million cases have been reported across 188 countries and territories,
resulting in more than 310,000 deaths. More than 1.66 million people have recovered.
The Covid-19 pandemic has thus far spread to 208 countries and regions of the world,
significantly affecting the global economy. Since the virus has been growing exponentially, even
the developed countries have been unable to contain its spread. As a result, people are dying in
the affected areas at an alarming rate. We can’t even think how deadly the highly contagious
disease will turn if it spreads from a moderate to a strong category in India or Bangladesh.
COVID-19 brought the global economy to a sudden stop, causing shocks to supply and demand.
Starting in January 2020, country after country suffered outbreaks of the new coronavirus, with
each facing epidemiological shocks that led to economic and financial shocks as a consequence.
The impact of coronavirus on the global economy will extend beyond 2020. According to
forecasts from the International Monetary Fund and World Bank, GDP per capita at the end of
2021 is still expected to be lower than December 2019 in most countries. Emerging markets and
other developing countries, in addition to facing difficulties in dealing with their own
coronavirus outbreaks, have suffered additional shocks from abroad. In their cases, the new
coronavirus brought a perfect storm. One can foresee a post-coronavirus global economy marked
by higher levels of public and private debt, acceleration in digitization processes, and less
globalization.
The global economy from COVID-19 has been faster and more severe than the 2008 global
financial crisis and even the Great Depression. It is observed that stock markets collapsed by
50% or more, credit markets froze up, massive bankruptcies followed, unemployment rates
soared above 10% and GDP contracted at an annualized rate of 10% or more. But all of this took

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around three years to play out. In the current crisis, similarly dire macroeconomic and financial
outcomes have materialized in three weeks (Roubini, 2020).
It is observed that, it took only 15 days for the US stock market to plummet into bear territory (a
20% decline from its peak) – the fastest such decline ever. Now, markets are down 35%, credit
markets have seized up and credit spreads (like those for junk bonds) have spiked to 2008 levels.
Even mainstream financial firms such as Goldman Sachs, JP Morgan and Morgan Stanley expect
US GDP to fall by an annualized rate of 6% in the first quarter and by 24% to 30% in the second.
The US Treasury secretary, Steve Mnuchin, has warned that the unemployment rate could
skyrocket to above 20% (twice the peak level during the financial crisis).
COVID-19 has a great impact on the socio-economic status and this includes:
 Loss of skilled and experienced workers;
 Reduced supply of labor;
 Loss of key staff and activist which may lead to poor organizing and defect in support of
membership;
 It causes poverty through the loss of life of bread winner;
 It reduced productivity and negative impact on economic growth.
 The impact of COVID-19 on global economy compared with the economic crisis in
2009(%)
 The impact of COVID-19 is apprehended to be unprecedented and will have lasting
economic damage on the global economy
 Before COVID-19 outbreak in January 2020, it was predicted that the global economy
will grow at 2.7% (UNCTAD calculation based on IMF, WEO). These numbers have
been revised downward.
 IMF earlier had projected that global economic growth is expected to rise from 3.0% in
2019 to 3.3% in 2020 and 3.4% in 2021
 However, IMF has now made a downward revision of 0.1 percentage point for 2019, 1.7
percentage point for 2020 and 0.2 percentage point for 2021 compared to those predicted
in the October 2019 (3.0% in 2019, 3.3% in 2020 and 3.4% in 2021) issue of the World
Economic Outlook (WEO) report of the IMF

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Economic outlook of selected countries (GDP Year on Year growth in %)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations
Comparative scenario of possible economic losses due to COVID-19 by the different
organizations

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Global Economic Growth Slowdown
Global Stock Market Scenario

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Economic Impacts of COVID-19
It is apprehended that the impact of COVID-19 and the global economy can be severe and the
global economy may fall into recession through the following channels:
Direct impact on production
The slowdown in China will have impact on exporters to China.
Supply chain and market disruption
 Most of the manufacturing firms are highly dependent on the imported intermediary
inputs from China.
 Many large companies rely on the sales in China to achieve their financial targets
Financial impact on firms and financial markets
 Disruption of inputs and production may put a pressure on some firms; particularly, the
companies with inadequate liquidity will be under stress.
 There might be the possibility for the firms to reduce their engagement in the equity and
corporate bond market due to the uncertainties happened by the outbreak.
Major areas of impact:
 Tourism, disruption in retail due to decline in consumption & demand, e-commerce may
boost, supply chain disruptions hurt telecom and technology, automotive production
stalled, and energy sector is vulnerable, windfalls for pharma but challenges around.
 The effect of this outbreak is still uncertain and evolving continuously as more and more
cases are found in more and more countries.
 The impact will depend on the duration of the outbreak, number of affected people and
countries, and the lethality of the outbreak.
 Global community has called for a coordinated policy actions to address the ramifications
of COVID-19
 Initiatives such as “World Economic Forum COVID-19 Action Platform” are needed to
enhance business support and protect the livelihoods of people.

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The Impact of COVID-19 on the Three Industries
Impact on primary industry
When the epidemic is still going on in many countries, the impact of the primary industry will be
further intensified. The United States euthanized pigs, dumped milk and other economic
depression scenes repeated. Germany poured out a lot of beer. Many fast food restaurants can't
even produce hamburgers. Because of the outbreak of the epidemic, the transportation of
agricultural means of production is blocked, the feed for livestock and poultry breeding is
difficult to get in and out of the market, and mature vegetables are unable to enter the market,
which makes the vegetables rotten on the ground, livestock slaughtered and buried, causing great
losses and waste.
Impact on secondary industry
The manufacturing sector is a major part of the economy as it accounts for nearly 16% of the
global GDP in 2018. As per the estimation by United Nations Conference on Trade and
Development (UNCTAD), the COVID-19 outbreak could cause global FDI to shrink by 5%-
15%, due to the downfall in manufacturing sector coupled with factory shutdown. Due to the
epidemics of COVID-19 across the globe, the manufacturers of automobile, food & beverage,
chemical, machinery, electrical and electronics, metal, aviation, pharmaceutical and aircraft
are facing concerns regarding the availability of raw materials. In recent months, there has been a
strong demand for medical materials. According to the data calculation of UN COMTRADE, in
2018, China's export of medical masks accounted for 46.0% of the world's total export, and the
export of protective clothing accounted for 49.3% of the world's total export. Under the global
spread of the epidemic, in 2020, the products with large estimated export value of national
defense epidemic products are mainly medical masks, disposable hats, medical gloves (plastic
materials), ultrasonic CT, medical goggles, protective clothing, patient monitors, alcohol cotton
ball cotton swabs, respirators and infrared thermometers.
Impact on the tertiary industry
The travel and tourism sector with COVID-19 outbreak has been particularly hard hit. The
European Union’s tourism industry is estimated to be losing around €1 billion in revenue per
month as a result of the outbreak. Due to the severity of travel restrictions and the expected
global recession, the International Air Transport Association (IATA) estimates that industry
passenger revenues could plummet by US$252 billion, 44 per cent below the 2019 figure.
According to the statistics of the Ministry of Transport of the People’s Republic of China, in
2020 the Spring Festival Railway sent passengers 210 million passengers, a year-on-year
decrease of 47.3%, highway passengers 1.21 billion passengers, a year-on-year decrease of
50.8%, waterway passengers 16.89 million passengers, a year on- year decrease of 58.6%, and
civil aviation passengers 38.39 million, a year-on-year decrease 47.5% .
But online services have risen dramatically. Listening to songs, fitness, or learning through
online courses, make telecommuting, online medical. The market scale of online education in
2020 is expected to exceed RMB300 billion yuan in China.

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The effect of COVID-19 on the three industries
The Impact of Coronavirus on the Bangladesh Economy
The unprecedented Covid-19 pandemic has caused disruptions to global trade, business, and education.
Bangladesh is equally affected by this contagion. The economic consequences of the Covid-19 outbreak
are tough to handle as the entire of the global supply chain has been interrupted due to worldwide
transportation shutdown.
Till now, the Bangladesh readymade garments (RMG) industry has received work order cancellations of
nearly $3 billion. Around 2 million workers in the industries will be affected by this. Around 4 million
people are directly engaged with the RMG sector e.g. backward linkage industries, accessories and
packaging factories and transportation sector. The import and export-oriented companies are also at risk.
The foreign remittance will come down and thus it will hit the foreign reserves of the country.
Bangladesh will fall into a really difficult situation if the country remains locked down for a longer
period. Consistent high growth has been unable to create sufficient jobs in the economy. Due to inequality
of income and asset distribution, the advantages of higher GDP growth is not evident in society.
Recently, garment workers coming back to Dhaka amid the government-imposed shutdown and the risk
of getting infected only revealed that due to disparity in wealth distribution these people are unable to stay
at homes without work for their survival, thus, they are concerned much more about their job rather than
Covid-19.

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The higher growth and increased per capita income have benefitted a small group of rich people much
more than the much greater number of poor people. Now it’s the time for the government to think about
this crucial issue and chalk out a long-term plan to minimize the disparity between the rich and the poor.
We all know the banking industry is in back gear due to mounting non-performing loans (NPLs). If the
RMG industry and its backward linkage industries fail, then the entire banking system will collapse.
Today, fifty-nine commercial banks and general insurance companies are heavily relying on garments and
related industries for their business.
The government has already declared a Tk 5,000 crore incentive package to mitigate the losses in the
RMG sector. However, if the outbreak prolongs it will be difficult for the government to handle the
situation and the result of this will be catastrophic as more than 85 percent of the country’s export
earnings come through the RMG sector.
We could not diversify our export basket, thus creating a huge risk in our export portfolios. If we look at
our RMG rival Vietnams export portfolios, RMG has earned one-fifth of its total export earnings.
Their export basket is pooled with some other industries combination; thus they don’t need to rely on only
one industry. For sustainable economic growth, Bangladesh should have diversified its export basket o
reduce the sole dependency on the RMG industry.
(Source: OECD Economic outlook report – March 2020)
0
1
2
3
4
5
6
7
8
9
World US Euroarea Japan China Bangladesh
2019
2020 ( Old Forecast )
2020 ( New Forecast )
[Real GDP Growth (%) ]

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Transmission Channels for the Bangladesh Economy: Global Level
Transmission Channels for the Bangladesh Economy: Domestic Uncertainties

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Current State of Bangladesh Economy in view of the Coronavirus Crisis
COVID-19 and the External Sector of Bangladesh
COVID-19 Affected Countries and Bangladesh’s Export Destinations

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COVID-19 and Destination of Major Export Items
COVID-19 Affected Countries and Import Sources

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COVID-19 Affected Countries and Remittance Sources
External Sector Performance Scenario
COVID-19’s adverse implications are being felt at a time when Bangladesh's external Sector is
under considerable pressure in several fronts:
 Export target for FY2020 (12% growth) is highly unlikely to be attained in view of the
negative growth over the first eight months of FY 2020 (-4.8%)
 Major export items such as knitwear (-5.7%), woven wear (-5.9%), home textile (-7.5%),
frozen fish (-4.4.%) and leather and leather products (- 9.1%) posted negative growth
 Import growth over the first seven months of FY2020 was negative (-2.7%)
 Important import sub-components such as intermediate goods (-2.1%) and capital goods
(-8.3%) including capital machineries (-22.0%) posted negative growth
 Remittance sector however registered positive growth in terms of robust growth of
inflows over first seven months (+21.5%), and a rise in numbers of migrant workers
going abroad (+4.2%)
 During first six months of FY 2020, the negative trade balance (-8.2 billion US$) and
services balance (-1.7 billion US$) could hardly be balanced by the positive secondary
income (rising to +9.6 billion US$ thanks mainly to remittance) and declining financial
account (falling to +1.8 billion US$)
 As a consequence, overall BoP position in December 2019 (+0.027 billion US$), while
somewhat better than December of the previous year (+27.0 million compared to – 513.0
million US$), remained weak.

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Implications of COVID 19 on External Sector Performance
 Already export sector has started to feel the adverse effects of COVID 19 Supply chain of
key sectors such as RMG got disrupted: particularly in the initial period because of snags
in import of raw materials from China (Yarn: more than half; synthetic yarn: two-thirds;
fabrics: three fourths), as also of assembling plant including electric equipment (more
than half).
 Exports are being negatively affected both from import side particularly from China and
export side: backward and forward supply chains disrupted; execution of orders delayed;
shipments deferred; L/C payments facing problems; business travels halted; uncertainties
as regards future demand
 The likely adverse effects of a global recession on demand for export, further
accentuating current negative performance
 While the fall in oil and consequently commodity prices could help Bangladesh, on
account of lower import payments, and also lower domestic demand, resulting in
arresting further weakened of BoP scenario, this could lead to a low-level equilibrium
with consequent negative implications for investment, trade-related activities and in the
final analysis in slowing down the pace of GDP growth.
Economic Challenges
Due to uncertainties over the invention of vaccination to prevent the fatal, it is fully
unpredictable to make a to-do list as lockdown or isolation is not the ultimate solution.
On a larger scale, we may have to face an economic slowdown in the short term while there
might be a recession in the long term. Monetary actions would be lowering the repo rate and
reduction of the Cash Reserve Ratio (CRR) to increase the money supply to the economy.
Crisis as Opportunity
It may sound trite, but – crises are (for the bold and the brave) opportunities. At the end of
February 2003, when the SARS crisis broke out and Chinese businesses went into lockdown,
Alibaba, under Jack Ma, organized the construction of its new on-line platform, with people
working from home and communicating by phone and modem. Alibaba’s market capitalization
today is $547 billion.
The mental health outcomes of the coronavirus disease 2019 pandemic are producing new
demands but also new opportunities for psychiatry. We know that there are mental health
outcomes of social distancing policies and financial uncertainty, as well as worries about
personal health, family, and friends. This will produce a global increase in adjustment issues and
anxiety among the population, which may increase demands on mental health services. The
urgent need for clinical training and skills building around telehealth, as well as newer
technologies, such as mobile apps, will determine the influence that psychiatry can have in
addressing the mental health sequelae of the coronavirus disease 2019 pandemic.

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The other visible opportunity (COVID-19) challenge brings is that it made us pay more attention
to the importance of self-sufficiency and readiness, or increased preparedness. This triggers more
change in the work mechanisms and to find sustainable mechanisms that help to rearrange our
internal life and the way it is constructed.
The synergy of humans was also clearer in this (COVID-19), which relief the tensions of many
polarized areas despite the ongoing wars in many countries. Community solidarity that such a
deep, complex crisis would bring to the mind of the many the essence of being and living
together in this world.
The other main opportunity that (COVID-19) crisis is that it would make us more aware about
the ‘intrinsic powers’ we have within us, which are more important than other resources,
including other natural resources.
The (COVID-19) epidemic shed light on basic needs for self-isolation facilities within cities,
housing areas and even buildings. The isolation would prevent the cross-infection that comes
from overcrowded wards and poor ventilation in many hospitals’ areas. This would reduce the
pressure on the medical and healthcare staff and make them more focused on the emergency
cases, the intensive care facilities readiness; besides make for them the time to work professional
and avoid unnecessary pressures.
It is a great opportunity for people the incidence of coronavirus gives us time to rethink about the
business models we adopted in our life. Government, organization’s and communities could re-
evaluate the ethical and the transparency issues of different industries, i.e. doing and creating
businesses from things that you don’t own.
Socio-economic Visible vs. Hidden Opportunities of (COVID-19)Crisis

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Recommendation
The study therefore recommends that:
 Palliative measures should be put in place for everybody; this will help in reducing the
economic hardship been experienced as a result of this pandemic.
 Government must ensure that residences adhere strictly to all rules and regulations set
aside to avert the spread of the virus.
 Government needs to make an early assessment of the immediate, short and medium term
impact on different economic activities.
 A major area of focus of government initiatives should be easing the disruptions in the
supply chains and ensuring their smooth operation both within and outside Bangladesh in
the coming days.
 Sectorial Support for Export Stimulating and, Domestic Supply and Demand. Some of
the service-oriented sectors need immediate support which includes travel and tourism
related activity.
 Immediate measures to tackle the health emergency.
 Care workers providing home or institution-based care.
 Hand hygiene at the workplace.
 Food retail.
 Supporting enterprises, jobs and incomes.
 Protecting workers in the workplace.
Conclusion
It is crystal clear that the coronavirus pandemic has affected the world generally; its implication
on the global economy cannot be undermined. What is really needed are fiscal measures to save
companies and banks from bankruptcy, so that they can recover quickly once the pandemic is
over. Policymakers should be considering various forms of tax relief and public guarantees to
help firms borrow if necessary. But the most promising option is a short-time work allowance.
This approach, which has been tried and tested in Germany, compensates for the
underemployment of the workforce through the same channels that are already used for
unemployment insurance.

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References:
1) https://www.bbc.com/news/business-51706225
2) World Economic Situation and Prospects: April 2020 Briefing, No. 136
3) https://economictimes.indiatimes.com/
4) https://www.policycenter.ma/publications/impact-coronavirus-global-economy
5)
https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWOR
LD
6) Financial Express:
Bangladesh:
https://thefinancialexpress.com.bd/views/opinions/covid-19-and-its-impact-on-bangladesh-
economy-1592580397
Global: https://thefinancialexpress.com.bd/page/economy/global
7) https://tbsnews.net/thoughts/covid-19-and-its-impact-bangladesh-economy-69541
8)https://covid19.who.int/?gclid=Cj0KCQjw28T8BRDbARIsAEOMBcwxBau2cCy-
ESZAD0Ztbi0uNK3CVUAKPhLnTe14whGgoiwoy8AuSoYaAjcCEALw_wcB
9) John Torous, MD, Department of Psychiatry, Beth Israel Deaconess Medical Center, Harvard
Medical School, 330 Brookline Ave, Boston, MA (jtorous@bidmc.harvard.edu). May 11, 2020.
doi:10.1001/jamapsychiatry.2020.1640

Covid 19 effect on economy

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